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Tuesday, April 24, 2018

New Home Sales increase to 694,000 Annual Rate in March

by Calculated Risk on 4/24/2018 10:14:00 AM

The Census Bureau reports New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 694 thousand.

The previous three months were revised up, combined.

"Sales of new single-family houses in March 2018 were at a seasonally adjusted annual rate of 694,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.0 percent above the revised February rate of 667,000 and is 8.8 percent above the March 2017 estimate of 638,000."
emphasis added
New Home SalesClick on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the last several years, new home sales are still somewhat low historically.

The second graph shows New Home Months of Supply.

New Home Sales, Months of SupplyThe months of supply decreased in March to 5.2 months from 5.4 months in February.

The all time record was 12.1 months of supply in January 2009.

This is at the top end of the normal range (less than 6 months supply is normal).
"The seasonally-adjusted estimate of new houses for sale at the end of March was 301,000. This represents a supply of 5.2 months at the current sales rate."
New Home Sales, InventoryOn inventory, according to the Census Bureau:
"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."
Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

New Home Sales, NSAThe last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In March 2018 (red column), 68 thousand new homes were sold (NSA). Last year, 61 thousand homes were sold in March.

The all time high for March was 127 thousand in 2005, and the all time low for March was 28 thousand in 2011.

This was well above expectations of 630,000 sales SAAR, and the previous months were revised up, combined. I'll have more later today.

Case-Shiller: National House Price Index increased 6.3% year-over-year in February

by Calculated Risk on 4/24/2018 09:14:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for February ("February" is a 3 month average of December, January and February prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: S&P CoreLogic Case-Shiller Home Prices: Cities in the West Continue to Lead Housing Momentum

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 6.3% annual gain in February, up from 6.1% in the previous month. The 10-City Composite annual increase came in at 6.5%, up from 6.0% in the previous month. The 20-City Composite posted a 6.8% year-over-year gain, up from 6.4% in the previous month.

Seattle, Las Vegas, and San Francisco continue to report the highest year-over-year gains among the 20 cities. In February, Seattle led the way with a 12.7% year-over-year price increase, followed by Las Vegas with an 11.6% increase and San Francisco with a 10.1% increase. Thirteen of the 20 cities reported greater price increases in the year ending February 2018 versus the year ending January 2018.
...
Before seasonal adjustment, the National Index posted a month-over-month gain of 0.4% in February. The 10-City and 20-City Composites both reported increases of 0.7%. After seasonal adjustment, the National Index recorded a 0.5% month-over-month increase in February. The 10-City and 20-City Composites both posted 0.8% month-over-month increases. All 20 cities reported increases in February before and after seasonal adjustment.

“Home prices continue to rise across the country,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The S&P CoreLogic Case-Shiller National Index is up 6.3% in the 12 months through February 2018. Year-over-year prices measured by the National index have increased continuously for the past 70 months, since May 2012. Over that time, the price increases averaged 6% per year. This run, which is still ongoing, compares to the previous long run from January 1992 to February 2007, 182 months, when prices averaged 6.1% annually. With expectations for continued economic growth and further employment gains, the current run of rising prices is likely to continue.

“Increasing employment supports rising home prices both nationally and locally. Among the 20 cities covered by the S&P CoreLogic Case-Shiller Indices, Seattle enjoyed both the largest gain in employment and in home prices over the 12 months ended in February 2018. At the other end of the scale, Chicago was ranked 19th in both home price and employment gains; Cleveland ranked 18th in home prices and 20th in employment increases. In San Francisco and Los Angeles, home price gains ranked much higher than would be expected from their employment increases, indicating that California home prices continue to rise faster than might be expected. In contrast, Miami home prices experienced some of the smaller increases despite better than average employment gains.”
emphasis added
Case-Shiller House Prices Indices Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 1.6% from the peak, and up 0.7% in February (SA).

The Composite 20 index is 1.3% above the bubble peak, and up 0.8% (SA) in February.

The National index is 8.2% above the bubble peak (SA), and up 0.5% (SA) in February.  The National index is up 46.3% from the post-bubble low set in December 2011 (SA).

Case-Shiller House Prices Indices The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 6.5% compared to February 2017.  The Composite 20 SA is up 6.8% year-over-year.

The National index SA is up 6.3% year-over-year.

Note: According to the data, prices increased in all 20 of 20 cities month-over-month seasonally adjusted.

I'll have more later.

Monday, April 23, 2018

Tuesday: New Home Sales, Case-Shiller House Prices

by Calculated Risk on 4/23/2018 08:16:00 PM

From Matthew Graham at Mortgage News Daily: NOW Mortgage Rates Are at 4-Year Highs

Mortgage rates moved markedly higher today, officially leaving them at new 4-year highs.
...
The average lender is quoting very well-qualified borrowers with huge downpayments something north of 4.5% on conventional 30yr fixed mortgages today. Let's call it 4.625%. Up until Friday, that number hadn't been over 4.5% except for on a few of those ill-fated February days. [30YR FIXED - 4.625%]
emphasis added
Tuesday:
• At 9:00 AM ET, S&P/Case-Shiller House Price Index for February. The consensus is for a 6.2% year-over-year increase in the Comp 20 index for February.

• Also at 9:00 AM, FHFA House Price Index for February 2018. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM, New Home Sales for March from the Census Bureau. The consensus is for 630 thousand SAAR, up from 618 thousand in February.

• Also at 10:00 AM, Richmond Fed Survey of Manufacturing Activity for April.

Housing Inventory Tracking

by Calculated Risk on 4/23/2018 04:48:00 PM

Update: Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases. 

I don't have a crystal ball, but watching inventory helps understand the housing market.

Here is a table from housing economist Tom Lawler showing the year-over-year (YoY) change for National inventory from the NAR, and the YoY change for California from the CAR.

It appears the YoY declines are slowing, and especially in California.

YOY % Change, Existing SF Homes for Sale
  NAR
(National)
CAR
(California)
Sep-17-8.4%-11.2%
Oct-17-10.4%-11.5%
Nov-17-9.7%-11.5%
Dec-17-11.5%-12.0%
Jan-18-9.5%-6.6%
Feb-18-8.6%-1.3%
Mar-18-7.2%-1.0%

The graph below shows the year-over-year change for non-contingent inventory in Las Vegas, Phoenix and Sacramento (through March), and also total existing home inventory as reported by the NAR (also through March 2018).

Click on graph for larger image.

This shows the year-over-year change in inventory for Phoenix, Sacramento, and Las Vegas.  The black line if the year-over-year change in inventory as reported by the NAR.

Note that inventory in Sacramento was up 19% year-over-year in March (inventory still very low), and has increased year-over-year for six consecutive months. 

Also note the inventory is still down sharply in Las Vegas (red), but the YoY decline has been getting smaller.

I'll try to add a few other markets.

Inventory is a key for the housing market, and I will be watching inventory for the impact of the new tax law and higher mortgage rates on housing.

Phoenix Real Estate in March: Sales up 3%, Inventory down 13% YoY

by Calculated Risk on 4/23/2018 03:28:00 PM

This is a key housing market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in March were up 3.3% year-over-year (including homes, condos and manufactured homes).

2) Active inventory is now down 12.9% year-over-year. 

This is the seventeenth consecutive month with a YoY decrease in inventory.

March Residential Sales and Inventory, Greater Phoenix Area, ARMLS
  SalesYoY
Change
Sales
Cash
Sales
Percent
Cash
Active
Inventory
YoY
Change
Inventory
Mar-084,303---82219.1%57,0811---
Mar-097,63677.5%2,99439.2%49,743-12.9%
Mar-108,96917.5%3,74541.8%42,755-14.0%
Mar-119,92710.7%4,94649.8%37,632-12.0%
Mar-128,868-10.7%4,22247.6%21,863-41.9%
Mar-138,146-8.1%3,38441.5%20,729-5.2%
Mar-146,708-17.7%2,22233.1%30,16745.5%
Mar-157,88417.5%2,17227.5%26,623-11.7%
Mar-168,5558.5%2,10724.6%27,5803.6%
Mar-179,3048.8%2,22623.9%24,871-9.8%
Mar-189,6153.3%2,43525.3%21,669-12.9%
1 March 2008 probably included pending listings

A Few Comments on March Existing Home Sales

by Calculated Risk on 4/23/2018 01:03:00 PM

Earlier: NAR: "Existing-Home Sales Climb 1.1 Percent in March"

A few key points:

1) As usual, housing economist Tom Lawler's forecast was closer to the NAR report than the consensus. See: Lawler: Early Read on Existing Home Sales in March.

2) Inventory is still very low and falling year-over-year (down 7.2% year-over-year in March). More inventory would probably mean smaller price increases, and less inventory somewhat larger price increases.    This was the 34th consecutive month with a year-over-year decline in inventory.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Existing Home Sales NSAClick on graph for larger image.

Sales NSA in March (434,000, red column) were above sales in March 2017 (355,000, NSA).

Sales through March are down about 2% from the same period in 2017.   This is a small decline - and it is too early to tell if there is an impact from higher interest rates and / or the changes to the tax law on home sales.

NAR: "Existing-Home Sales Climb 1.1 Percent in March"

by Calculated Risk on 4/23/2018 10:12:00 AM

From the NAR: Existing-Home Sales Climb 1.1 Percent in March

Existing-home sales grew for the second consecutive month in March, but lagging inventory levels and affordability constraints kept sales activity below year ago levels, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.1 percent to a seasonally adjusted annual rate of 5.60 million in March from 5.54 million in February. Despite last month's increase, sales are still 1.2 percent below a year ago.
...
Total housing inventory at the end of March climbed 5.7 percent to 1.67 million existing homes available for sale, but is still 7.2 percent lower than a year ago (1.80 million) and has fallen year-over-year for 34 consecutive months. Unsold inventory is at a 3.6-month supply at the current sales pace (3.8 months a year ago).
emphasis added
Existing Home SalesClick on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in March (5.60 million SAAR) were 1.1% higher than last month, but were 1.2% below the March 2017 rate.

The second graph shows nationwide inventory for existing homes.

Existing Home Inventory According to the NAR, inventory increased to 1.67 million in March from 1.59 million in February.   Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Year-over-year Inventory Inventory decreased 7.2% year-over-year in March compared to March 2017.  

Months of supply was at 3.6 months in March.

Sales were above the consensus view. For existing home sales, a key number is inventory - and inventory is still low. I'll have more later ...

Chicago Fed "Index points to a moderation in economic growth in March"

by Calculated Risk on 4/23/2018 08:36:00 AM

From the Chicago Fed: Index points to a moderation in economic growth in March

Led by slower growth in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) declined to +0.10 in March from +0.98 in February. Three of the four broad categories of indicators that make up the index decreased from February, but two of the four categories made positive contributions to the index in March. The index’s three-month moving average, CFNAI-MA3, decreased to +0.27 in March from +0.31 in February.
emphasis added
This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Chicago Fed National Activity Index Click on graph for larger image.

This suggests economic activity was above the historical trend in February (using the three-month average).

According to the Chicago Fed:
The index is a weighted average of 85 indicators of growth in national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.
...
A zero value for the monthly index has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth (in standard deviation units); and positive values with above-average growth.

Sunday, April 22, 2018

Monday: Existing Home Sales

by Calculated Risk on 4/22/2018 08:34:00 PM

Weekend:
Schedule for Week of Apr 22, 2018

Monday:
• At 8:30 AM ET, Chicago Fed National Activity Index for March. This is a composite index of other data.

• At 10:00 AM, Existing Home Sales for March from the National Association of Realtors (NAR). The consensus is for 5.28 million SAAR, down from 5.54 million in February. Housing economist Tom Lawler estimates the NAR will reports sales of 5.51 million SAAR for March.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are down 16, and DOW futures are down 138 (fair value).

Oil prices were up over the last week with WTI futures at $68.22 per barrel and Brent at $73.91 per barrel.  A year ago, WTI was at $49, and Brent was at $50 - so oil prices are up about 40% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.76 per gallon. A year ago prices were at $2.42 per gallon - so gasoline prices are up 34 cents per gallon year-over-year.

Goldman: "Moving Beyond Full Employment"

by Calculated Risk on 4/22/2018 11:53:00 AM

A few brief excerpts from a note by Goldman Sachs economist David Mericle:

... Are we really at full employment? Won’t job growth naturally slow down soon? Why is wage growth so much lower than in previous expansions? ...

We now see the labor market as at or a bit beyond full employment. ... we estimate a structural unemployment rate of about 4.5%, modestly above the current 4.1% rate. While the cyclical participation gap has recovered more slowly, it too now appears closed. A further cyclical boost to participation is possible, but we expect it to be quite limited.

Meanwhile, the pace of job creation shows no sign of slowing. ... We see little evidence that supply constraints will impose a forceful natural deceleration any time soon, and instead expect robust labor demand to drive the unemployment rate to 3.6% by end-2018 and 3.3% by end-2019, the lowest rate since the Korean War.

We have long stressed that wage growth expectations need to be recalibrated to the meager rate of productivity growth seen this cycle, implying a full employment rate of wage growth of roughly 3%. ... our wage tracker, now running at 2.5%, looks only moderately disappointing. ... signs of acceleration are emerging, notably in our wage survey leading indicator, now running at 3.2% ...
Mericle argues that the US economy is at or close to "full employment", that job gains will remain healthy for some time, and that wage growth is only "moderately disappointing".